Question

Smith & Jones is a money management firm specializing in fixed-income securities. One of its clients gave the firm $100 million to manage. The market value for the portfolio for the four months after receiving the funds was as follows:
End of Month 
Market Value (in millions) 
1 
$ 50 
2 
$150 
3 
$ 75 
4 
$100 
Answer the below questions based on the above table.
(a) Calculate the rate of return for each month.
(b) Smith & Jones reported to the client that over the four-month period the average monthly rate of return was 33.33%. How was that value obtained?
(c) Is the average monthly rate of return of 33.33% indicative of the performance of Smith & Jones? If not, what would be a more appropriate measure?


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  • CreatedAugust 22, 2015
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